Ever since the housing market began to improve after the crash that began in 2006, market watchers, real estate professionals and economists have been concerned about the continuing resistance by young Americans to buying a home. First time home buyers almost disappeared from the market, and their return has been slow to get moving.
Of course, there are some very good reasons for the Millennial generation to shy away from home ownership. They watched the collapse, with family and friends losing their homes to foreclosure. Articles abound telling them that home ownership is no longer an investment in your financial future. Value appreciation is not what it was before the crash. Many have no start at all on saving for a down payment. Some have stressed credit ratings due to consumer debt. Most of all, Mom and Dad are letting them live at home.
In late 2016, articles began to appear predicting a return of first time homebuyers to the market. Predictions are for a ramping up of demand beginning in Spring of 2017. One stated reason is the improvement of the economy and announced coming tax breaks from the new administration in Washington. There are low down payment options reappearing, and the FHA 3% down payment is popular.
Down payments could be easier for many because parents are loaning the money, and rules have been relaxed for sources allowed for down payment funds. Those parent loans bring us to the “aftershock” discussion. One of the primary reasons for home price appreciation in recent years is a lack of inventory. Fewer homes for sale mean more buyer competition, and prices rise.
One of the reasons stated for low inventories is the holding back from selling by members of the Boomer generation. They’ve been reluctant to buy a replacement home until things settle out. Also, many of them are those landlord parents with children keeping them in their current home. The aftershock from Millennials moving out and buying could involve:
Parents Depleting Retirement Funds to Loan
Loaning down payment money to the children to help them buy a home is noble, and it gets them started on home ownership. However, five figure loans to children are a gamble at best. They shouldn’t be counted upon for interest payments or repayment moving into retirement. The simple fact is that those loans or even gifts reduce retirement income.
Parents Now Free to Move
One way to get back that loaned cash is to convert their home equity to cash. Downsizing after the kids move out is now possible, and they can use the difference in current home value and new home purchase price to help with retirement funding. This new freedom to sell out and move is going to be luring Boomers to list their homes in volume.
The Aftershock
If and when these predictions come to pass, there are going to be a whole lot of homes coming on the market. Inventories will grow, and there will be some pressure on prices. At the least, there should be a slowing of price increases in many market areas. What does this mean for investors? This question can only be answered on a neighborhood-by-neighborhood basis. In areas where renters have wanted to live but couldn’t find a home, it could be a great opportunity. For flippers, there will be some opportunities, especially if older homes can be improved with the bells & whistles today’s buyers want.
"""As always to get two of my best-selling books for free, go to http://www.deansfreebook.com.
Enjoy this wisdom and have a great week!
Join Dean’s 860,000+ of Fans on Facebook: http://bit.ly/DeanFacebook Tweet to Dean: http://bit.ly/Tweet2Dean Follow On Instagram: http://bit.ly/InstagramDean Follow Along On YouTube: https://www.youtube.com/user/deangraziosi """"